Gas Cards are a Bright Spot in Dreary Holiday Forecast

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Gas Cards are a Bright Spot in Dreary Holiday Forecast

SCHAUMBURG, Ill. -- More than one-third (35 percent) of U.S. consumers across all income levels expect to spend less this holiday season than they did last year, according to new research from The Nielsen Co. With an economy in turmoil, only 6 percent expect to spend more, while 50 percent of consumers expect to spend the same amount as last year during the holiday season, typically defined as Thanksgiving week through the last week of December.

Nielsen, parent company to Convenience Store News, said its survey of 21,000 U.S. households also showed high income ($100,000 per year and above) consumers are also feeling the pinch. Nearly one-third (32 percent) of affluent shoppers plan to spend less this holiday season. Only 5 percent expect to spend more.

"Clearly, consumers across all income levels have some trepidation about holiday spending," Todd Hale, senior vice president of Consumer & Spending Insights, said in a statement. "The unstable economic environment is creating a high level of caution among consumers, leading us to conclude that this will be a tough holiday season."

Of those consumers who expect to spend about the same, about half say they will spend the same amount this year in grocery stores, supercenters and mass retailers. However, department stores and electronic retailers will have a more difficult time—almost one-third of consumers (28 percent) expect to spend less in these stores this year. Convenience and gas retailers may come out ahead this year, with 12 percent of consumers expecting to spend more in c-stores—likely related to a rise in pre-paid gas cards as gifts this holiday season, according to Hale. That 12 percent figure tied online shopping for the highest percentage of consumers who expect to spend more this holiday season. A little less than a third (30 percent) of consumers expect to spend the same this year in convenience stores and 14 percent expect to spend less.

"Retailers who answer consumers’ call for value will capture shoppers’ attention this holiday season," said Hale. "Whether it’s low prices, instant rebates or free shipping offers, value messages will speak to bargain-seeking consumers in today’s tough economic climate."

The push for value means the gift cards that are redeemed will likely go for gas, groceries, telephone service and auto maintenance, according to Nielsen.

Nielsen forecasts a 4.7 percent gain in dollar sales or $98 billion across grocery stores, drug stores, mass merchandisers and convenience stores this holiday shopping season. The growth forecast, while higher than last year’s 4.5 percent sales gain, is tempered by higher commodity prices. Nielsen projects unit sales to be flat or down 0.8 percent vs. a year ago.

"We project unit sales to be flat to declining as consumers reduce spending and modify their shopping activities to focus on necessity vs. discretionary items," said James Russo, vice president of marketing, The Nielsen Co. "The expanding credit crisis, housing malaise, commodity price pressures, unstable labor market and plummeting consumer confidence all contribute to a weak holiday shopping forecast and quite possibly the worst holiday spending decline since the worldwide recession in the early ‘90s."

The Nielsen executives did offer this advice to retailers and manufacturers on how to survive the upcoming holiday season:

-- With a high level of planned reductions in spending among shoppers, manage inventory like never before to avoid extra stock come January;
-- Reach out to your best customers in stores, though direct mail and/or via advertisements, and make them feel special about your brands and your stores by providing them with special coupons or sale prices;
-- Recognize that necessities, not the nice-to-haves, will drive sales this holiday season. Toiletries, baby care products, food items and gift cards for basics are expected to succeed.
-- Retailers are likely to see a big upside in consumer packaged goods sales. Leverage those products to drive basic gifts and stocking stuffers and special holiday packs for food and beverage items.